the blog

The following is part of a series of guest posts from wonderful people in my network who stepped up to write while I'm travelling. If you'd like to join the cadre of guest writers, send me an email at hello@benjohnson.co.

Congratulations, graduate! You’ve made it into the real world. Unfortunately, the world kicks you in the shin and expects you to run a marathon.

With tuition increasing about 5% every year 1, over 50,000 full time private sector jobs shed in the last year, and cost of living rising, it is crucial for new graduates to pay off student loans in order to even start at zero. The cost of tuition in Canada for one year for post secondary education currently sits at an average of $5,772; with Newfoundland and Labrador at the lowest ($2,644) and Ontario at the peak ($7,259).2 For those who have chosen private universities or those that require on-campus room and board, the costs of education easily doubles or triples. Times that by 4 years.

Personally, I chose to enroll in Canada’s most expensive post-secondary institution3, lived on campus and spent a semester in an unpaid internship. (Don’t get me started on internships.) It was also the most formative and engaging period of my life thus far. The piece of paper that put me on par with many peers easily cost nearly $100,000. The help of parents, scholarships, summer jobs and federal debt forgiveness were not enough to cover all my post-secondary expenses. Needless to say, paying off student loans was an uphill battle, yet I was able to become debt-free in 1 year.

Sorry to disappoint, but this is not a magical formula, but rather humility, hard work and discipline.

Pay a lump sum to chip away at the principleIf you have any savings whatsoever, use it to repay a lump sum towards your loan upon graduating. Everything I made as a student from summer jobs, freelancing projects, and craft fairs etc. went towards chipping away the total principle (original) amount of the loan. The smaller your principle amount is, the less interest you will pay over time since interest is taken as a percentage of your total amount outstanding.

Accept a full time job ASAPThe glory days of taking a year to travel or feeling entitled to a well-paying job that funnels into a career or is remotely related to your field of study are difficult to come by. Widen your scope and critically assess your skills to land a good entry-level job and humbly accept. Just because you have an undergraduate degree doesn’t mean you will be able to land your dream job right away and holding out for months just allows interest to accrue on your loan. Right away, I took a job at a measly $12 hourly rate, but it was good enough. At the time, I wasn’t even aware that it would be the start of a marvelous career. I put in my time, worked hard and received promotions, which I dutifully put into my student loans.

Know your numbersPeople say it all the time “I’m not a numbers person” or “I was never good at math”. I failed Math 12 and it’s no excuse for not sitting down and crunching out some simple arithmetic. Take the income from your full-time job and deduct absolutely essential expenses. This is then the maximum amount you can afford to contribute to your National and Provincial Student Loans monthly. Paying a large sum each month, again, reduces your principle owed, decreasing interest and also allows you to pay off the loan faster than making minimum payments. Be careful with the amount you set with Student Loans because there is a penalty if you are not able to make the amount each month. Set a lower amount officially with Student Loans, but a higher goal personally and try exceeding the amount you promised to pay. There will be months with more expenses than others, so plan accordingly. (i.e. Christmas and Summers usually have increased spending.)

Budgeting your “essential expenses” can be difficult. Accept that you may not be able to travel, go to a lot concerts or shop as much, but the consumer world will still be there when you are debt free and living within your means. Consider what you can’t live without and what you can. For example, I limited myself to two bought coffees a week, packing lunch everyday and going out for dinner once a week. I was still able to meet friends to catch up, but stayed within my budget. Be disciplined with yourself and stick to your budget. Apps like Mint are helpful in setting up a budget and showing you your current spending habits. It will also alert you when you have gone over!

Move back home or delay moving outThis may seem like an unbearable living circumstance. Who wants to move back in with their parents after experiencing the freedom and independence? It’s probably not what you had imagined post-grad life to be like, but swallow your pride and live at home for a short amount of time. Even if your parents require you to pay rent, which is fair, it is likely below market value and you will definitely save on groceries, utilities, internet, and cable etc. It also takes a considerable amount of grace, patience and communication to live with your parents as an adult child. Honing these characteristics will take you far in life with work, friends and that future someone as well.

Lesser known tips!

The grace period is a 6-month time frame within which you do not have to begin payments. This time allows you to find a job after graduation. However, interest is still being charged within this grace period; it is just that repayments are not yet mandatory. To reduce the amount of interest you will owe on top of your loan, consider your last day of classes as the start date for to begin paying off your loan. 6 months of interest can easily become a lot of money! (For example: A $25,000 loan with an interest rate of 5.5% will cost extra $687.50 if you start at the end of your grace period.)

There is little information or resources about debt forgiveness, but it DOES exist. The national or provincial government often extends debt forgiveness for those that are entering a specific profession or those in good academic standing. People who qualify for loan forgiveness often work in health care, remote locations or specialize in teaching students with disabilities. Each province has its own rules and regulations, but research to see what you are qualified for. Having your student loan forgiven in full or part is essentially free money. Let that be your motivation to study hard if you’re still in school. It pays, literally! My Money Coach has more information on this topic.

It sounds like life would really stink when you’re in debt and, honestly, it does! Debt is serious matter that plagues 75% of Canadians.4 Tackling debt early in life, creating good spending habits during debt and maintaining those habits afterwards will set you on the right track to truly enjoy the things in life without the dread of overextending your resources. Yes, you want to travel while you’re young. Yes, you want to experience life in it’s fullest. There’s lots of time to do so if you can be disciplined for a short while. Prioritizing positive spending after repaying my student loans in 1 year has allowed me to explore over 6 countries overseas, always be generous to those in need, and gather interest on investments. This time the interest is in my favour.

Anna is a Digital Marketing Strategist at Frontier. She helps charities across Canada break into online fundraising via email, ads, social media and web. In her spare time, Anna is actively building community at the Table Church, hiking and climbing with her husband, Rob, or entertaining their kitten, Otto.